The global debate on poverty alleviation is increasingly framed in terms of enabling economic opportunities for the poor, in order to create sustainable economic growth in developing countries (World Resources Institute, 2007). Perhaps the most significant consequence of this shift is the increasing conviction that the private sector should be engaged in the challenge to create economic growth in developing countries. Economic and political developments, in particular, globalization and the increased influence of markets and private investments worldwide, have added to the belief that mobilizing existing private sector financial and intellectual resources is vital in order to achieve sustainable development, reduce poverty and reach ambitious development targets such as the Millennium Development Goals (MDGs) (Dicken, 2003; Wheeler and McKague, 2002).
This conviction, however, is not new, nor is it based on idealism. In the 1994 World Investment Report for example, multinational corporations (MNCs) are described as the main vehicle for the achievement of economic stability and prosperity in developing nations, as they stimulate growth and improve the host countries’ international competitiveness (UNCTAD, 1994). A relevant indicator of the importance of the private sector for developing countries is the fact that private sector investment in these countries has been growing for decades. In recent years, Foreign Direct Investment (FDI) by MNCs in developing countries has increased rapidly. For example, it increased from 20 billion USD in 1990 to 240 billion USD in 2000. In the years that followed FDI declined until 2003, but is currently on the rise again. In contrast, Official Development Assistance (ODA) to developing countries today totals about 55 billion USD annually, and has been declining slightly over the last decade. In the mid-1990s, FDI surpassed ODA, and today the sheer scale of foreign direct investment versus ODA has demanded that the role of MNCs in development be taken seriously (Wheeler and McKague, 2002; Dicken, 2003).
The private sector has merited further action in development for a long time. However, a catalyzing moment did not occur until the World Summit on Sustainable Development in Johannesburg in 2002, when emphasis was placed on the role of the private and public sectors as key partners in solving problems on a global scale and improving the standard of living of the world's poor.